Guarantor as a routine cannot claim for notice under Section 13(2).

S.J. Mukhopadhaya, J.

As all the cases arise out of a common proceeding of the Debt Recovery Appellate Tribunal, Chennai, (hereinafter referred to as DRAT) and common question of law involved, they were heard together and are being disposed of by this common judgment.

2. In W.P. No.23515/05, the petitioner has challenged the order dated 13th June, 2005; in W.P. No.24534/05 and CRP No.1841/05, the petitioners have challenged the common order dated 13th June, 2005, passed by the DRAT, Chennai, in M.A. (SA) No.60/05 in S.A. No.19/04; in W.P. Nos.26849/05 and 27511/05, the petitioners have challenged the order dated 13th June, 2005, passed by DRAT, Chennai, in M.A. (S.A.) No.59/05. The petitioner in W.P. No.26489/05 has also challenged the order dated 29th July, 2005, passed in I.A. No.98/05 in M.A. (S.A.) No.59/05 whereby extension of time was allowed. In W.P. No.30664/05, the petitioner, ICICI Bank, has challenged the proceeding and notices issued on different dates in R.C. No.1985/91/A3. The same petitioner, ICICI Bank, in W.P. No.30860/05 has challenged the order dated 9th Aug., 2005, passed in R.A. (SARFAESI) No.25/05.

3. One of the question raised in these cases is:

“Whether a guarantor, who also falls within the meaning of “borrower”, u/s 2 (f) of the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (hereinafter referred to as SARFAESI Act, 2002 – also known as NPA) is entitled to have notice under sub-section (2) of Section 13 of the Act, if the secured creditor takes recourse to one or more measures under sub section (4) of Section 13 to recover his secured debt?”

4. For determination of the aforesaid issue, it is not necessary to discuss all the facts except the relevant ones, as mentioned hereunder: -

In December, 1970, M/s. Madras Petrochem Limited (hereinafter referred to as borrower) availed loan from ICICI Bank (hereinafter referred to as bank). M/s. Mahavir Plantation Private Limited, a sister-concern of the borrower, had given a corporate guarantee (hereinafter referred to as guarantor) as security for dues and repayment of the loan facilities availed by the borrower. The borrower had also borrowed loan from other financial institutions, such as IDBI, Tamil Nadu Industrial Investment Corporation of India, LIC, Indian Bank, Bank of India, Central Bank of India and Standard Chartered Bank, but failed to repay the borrowed amount. The financial institutions moved before BIFR for reference, but the borrower company having failed to comply with the scheme, the BIFR recommended for winding up of the company. The appeal to AIFR was also dismissed.

5. ICICI Bank, for enforcement of security interest, issued notice u/s 13 (2) of the SARFAESI Act on 20th Nov., 2002, asking the borrower, M/s. Madras Petrochem Ltd., to discharge its full liabilities. But having received no reply, ICICI Bank, u/s 13 (4), took possession of the assets of M/s.Madras Petrochem Ltd. on 9th May, 2003. A recall notice to the borrower was issued on 17th June, 2003, showing claim of Rs.7,31,06,822/= as on 15th June, 2003. A notice of sale was also issued under Rule 8 (6) on 3rd July, 2003, followed by paper publication effected for sale issued on 8th Aug., 2003, fixing 23rd Aug., 2003, as the date. Original Application was filed before DRT, Mumbai in O.A. No.350/03 for recovery of a sum of Rs.7,31,06,822/=. Recall notice was also issued to the guarantor on 5th Sept., 2003.

6. The borrower, M/s. Madras Petrochem Ltd., preferred S.A. No.19/04 before DRT, Chennai, for recovery on 20th May, 2004. In the said appeal, notice was issued to ICICI Bank on 8th June, 2004. The prayer for interim stay was rejected. However, the bank was directed to inform the Tribunal in advance its future course of action on the matter. On 16th Aug., 2004, public auction was fixed for 16th Sept., 2004, keeping the upset price as follows :

i) Lot A – Immovable Properties – Reserve Price -Rs. 25 Crores

ii) Lot B – Mova